The Top 10 Canadian Marijuana Stocks of 2018

This was one list that was bound to be a disappointment from the get-go.

Marijuana stocks have ebbed and flowed for a few years now, but the absolute peak of the frenzy hit about this time last year. That made the prospect of a year-end list a tough proposition. How bad was it? Of the scores of cannabis related issuers listed in Canada just eight had a positive return in 2018.

You heard that right. Eight.

The culprit, of course, was a year end swoon in global markets that wreaked havoc on most every sector and gutted this one. A survey taken in early October, for instance, would have produced dozens of winners. But that, as they say, is why you play until the final buzzer. We bring you the top ten Canadian-listed marijuana stocks of 2018.

Ianthus Capital gets top honours in 2018, with investors hoping for more of the same heading into 2019: in October, Ianthus, which owns and operates licensed cannabis cultivation, processing and dispensary facilities across a number of states in the US announced an agreement to purchase Arizona-based medical cannabis company MPX Bioceutical Corporation (#8 on our list, below) in an all-stock transaction. The deal, which should close by the end of January, could very well vault Ianthus into the upper tier of cannabis companies in the US, giving it operations and licenses in ten states, including 56 retail locations and 14 cultivation and processing facilities.

After the October announcement, analyst Russell Stanley of Beacon Securities resumed his coverage of Ianthus with a “Buy” rating and $12.50 target price, saying, “We continue to view IAN as an overlooked and undervalued multi-state operator (MSO) with a strong geographic footprint and a compelling valuation.”

Mississauga-based TerrAscend owns a medical and rec cannabis producer named Sol-ace Health which has supply agreements with a number of provinces in Canada. The company’s other, perhaps bigger, claim to fame is its partnership with Canopy Rivers, the investment wing of industry giant Canopy Growth Corp. With the help of Canopy Rivers, TerrAscend is pushing for access to burgeoning markets in the US, such as in New Jersey where last month TerrAscend received one of only a small handful of licenses for cannabis cultivation and sales.

Over the past year, Origin House (formerly CannaRoyalty) has transferred its focus from being a royalty and equity investment company to a branded cannabis products business. Just formed in March of 2017, OH now has multiple interests in California — indeed, it’s the largest distributor of cannabis products in what is effectively the largest pot market in the world — and it continues to make key acquisitions, including Canadian retailer 180 Smoke picked up last September.

Cronos made headlines early in 2018 by becoming the first Canadian pot company to list on an American exchange. Like the rest of the sector, CRON came down from its early January high and traded sideways until mid-August when a new investment deal between Canopy Growth and alcohol giant Constellation Brands set off a buying spree for the next two months. In Cronos’ case, the big news came late in the year when tobacco giant Altria Group announced a $2.4-billion, 55% stake in Cronos.

What more can be said about Canopy Growth? The sector leader in terms of market cap but also clearly the industry bellwether (see above regarding Constellation Brands) and trend-setter. Not content to be kingpin in Canada, Canopy’s ambitions towards world domination were underlined last month when CEO Bruce Linton responded to the passing of the 2018 US Farm Bill (which removed hemp from the Controlled Substances list) by saying that Canopy intends to enter the US market. As with every other company in the sector, all eyes will be on Canopy’s next quarterly report, which will be the first full test of the company under Canada’s rec cannabis regime.

Shares of Moncton-based licensed producer Organigram fared better than some of the more widely-known names, and that’s a testament to the company’s ability to deliver the goods, namely, quality low-cost, high-yield bud. The company also impressed with the carrying out of its expansion plans, which are gunning for a peak yield of 113,000 kilos per year, while now having sewn up supply agreements with nine out of ten provinces.

After OGI’s quarterly financials came in solid last month, Mackie Research’s Greg McLeish ended up reiterating his $10.00 target price, saying that Organigram deserves his recommendation of Top Pick for 2019, calling OGI Canada’s leading indoor cannabis producer.

“Organigram has chosen an indoor cultivation where all aspects of the growing environment are monitored and controlled, including light, heat, and water,” McLeish said. “This allows the company to optimize growing cycles, improve overall yield, and ensure consistent product quality.”

Last month, HEXO Corp gave us a taste of how cannabis companies are faring in a post-October 17 Canada when the company released its first quarter fiscal 2019 ended October 31. The Gatineau, Quebec company — which has the largest supply agreement among producers in la belle province — reported a top line of $6.7 million, beating the consensus estimate of $5.7 million, with an EBITDA loss of $10.5 million, higher than the expected $5.7 million. But it was the juicy sales in adult-use cannabis during those first two weeks of legal rec cannabis that drew attention: a whopping $5.2 million.

MPX’s merger with Ianthus Capital was announced in October and should be completed later this month. The deal, which calls for Mpx shareholders to be offered an all-stock transaction valuing Mpx at US$835 million, puts the combined company into the upper echelon of US cannabis firms, adding MPX’s Arizona operations (and four newly announced store licenses in Nevada) to the operations Ianthus holds across six states.

Agraflora Organics (formerly PUF Ventures) operates a major propagation facility in Delta, BC, part of which is being converted to cultivation. In October, the company got a nice boost to its share price when news came that Health Canada had finally awarded it with a cultivation license for its London, Ontario growing operation, AAA Heidelberg, which is partnered up with the aforementioned Canopy Rivers’ CraftGrow program.

Agraflora’s ambitions are commendable: they recently inked a supply agreement with e-commerce platform Namaste Technologies subsidiary Canmart and have their sights set on an annual capacity of 250,000 kg, which would vault them into the big leagues.

It’s a sign of the carnage over the past couple of months in the pot sector that National Access finished 2018 down 20 per cent but still made the top ten! The cannabis clinic and retailer made headlines last spring when Canadian coffee company Second Cup announced a partnership with National Access to turn some of its locations into pot shops. More recently, META got serious backing from four licensed producers (Aphria, CannTrust, VIVO Cannabis and Zenabis) who bought $20 million in META shares, with the potential purchase of another $35-million-worth. In total, National Access aims to have 200 retail locations open within the next year and a half.

About Nick Waddell

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.